What limitations can a court impose on the Chop5 Salad Kitchen agreement to make its terms reasonable?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
"Restricted Territory" means: the geographic area within: (a) a 10-mile radius from your Restaurant (and including your Restaurant's premises itself); and (b) a 10-mile radius from all other Restaurants that: (i) are operating or under construction as of the Effective Date; (ii) remain in operation or under construction during all or any part of the Post-Term Restricted Period; and (iii) are located in any state in which you or your affiliate operates (or operated) a Restaurant; provided, however, that if a court of competent jurisdiction determines that the foregoing Restricted Territory is too broad to be enforceable, then Restricted Territory means: the geographic area within: (a) a five (5) mile radius from your Restaurant (and including your Restaurant's premises itself); and (b) a five (5) mile radius from all other Restaurants that: (i) are operating or under construction as of the Effective Date; (ii) remain in operation or under construction during all or any part of the Post-Term Restricted Period; and (iii) are located in any state in which you or your affiliate operates (or operated) a Restaurant.
Source: Item 23 — RECEIPT (FDD pages 50–178)
What This Means (2024 FDD)
According to the 2024 Chop5 Salad Kitchen Franchise Disclosure Document, a court may modify the restricted territory outlined in the agreement if it deems the original terms too broad to be enforceable.
Specifically, the standard "Restricted Territory" is defined as the geographic area within a 10-mile radius of the franchisee's restaurant, including the premises, and a 10-mile radius from all other Chop5 Salad Kitchen restaurants operating or under construction as of the effective date, which remain in operation during the post-term restricted period, and are located in any state where the franchisee operates a restaurant.
However, the agreement anticipates potential challenges to this broad definition. If a court finds the 10-mile radius too extensive, the "Restricted Territory" will be reduced to a 5-mile radius from the franchisee's restaurant and other qualifying Chop5 Salad Kitchen locations. This provision demonstrates an attempt by Chop5 Salad Kitchen to ensure the enforceability of the non-compete clause by including a built-in mechanism for judicial modification.